C3.ai Just Scored a Government Win. Should You Buy the Beaten-Down AI Stock Now?

Core Insights - C3.ai's shares have faced significant challenges, dropping 55.52% in 2025, with a notable decline of 28.2% in August due to management warnings about missing guidance [1][4] - The company has recently shown signs of recovery, with quarterly results indicating a slight bounce in stock price, suggesting potential resilience [1][7] Company Overview - Founded in 2009 and based in Redwood City, California, C3.ai specializes in enterprise AI software, offering over 130 applications across various sectors including manufacturing, finance, and defense [2] - The company aims to enhance operational efficiency and innovation through practical AI solutions [2] Recent Developments - C3.ai has secured FedRAMP authorization, allowing it to handle sensitive federal workloads, which could open doors to government contracts [3][15] - This certification enhances the company's credibility in a security-focused sector and positions it for growth in federal markets [16][17] Financial Performance - In Q2 of fiscal 2026, C3.ai reported a revenue of $75.15 million, a 20.3% decline year-over-year, while adjusted loss per share was -$0.25, wider than the previous year's loss [8][12] - Subscription revenue fell to $70.2 million, and professional services revenue dropped 62.8%, impacting overall margins [8][9] Market Conditions - The recent 43-day government shutdown affected workflows and sales timelines, contributing to the company's revenue decline [9] - Despite these challenges, federal bookings surged 89% annually, indicating strong demand in the government sector [10] Future Outlook - Management projects Q3 revenues between $72 million and $80 million, reflecting a 19% to 27% drop from the previous year, with expected adjusted operating losses widening [12][13] - For fiscal 2026, anticipated revenues are between $289.5 million and $309.5 million, marking a 20% to 26% decline from fiscal 2025 [13] Analyst Sentiment - Analysts maintain a cautious stance on C3.ai, with a consensus rating of "Hold" and a mean price target of $16.67, suggesting a potential upside of 8.6% [18] - The stock is currently priced at 6.1x price-to-sales trailing, which is higher than some peers but below its historical median [19]